Have you recently received one of those dreaded brown envelopes from HM Revenues & Customs?
Did you get a written reminder that you’ll need to file your completed tax return by January, 2015? If you did you can take a small amount of comfort from the fact that you are not alone: thousands of people received the same letter. The chances are that many of those thousands will probably now file that letter away and not even think about completing their tax return until the very last minute.
HMRC estimates that around 700,000were outstanding on 31st January, 2014.
Whilst that reaction might be understandable, the accountants here at Steven Glicher think that you would be much better off if you filed your tax returns as soon as possible, and we would be more than happy to help you with that? But, you’re probably wondering what’s the point of filing my tax return now when the deadline is 6 months away? Well, hopefully the following information might help to convince you; the early bird always does get the worm after all.
You’re guaranteed not to miss the tax return deadline.
Filing your tax return late can be costly. If you file your tax return late, you will be issued with an initial, automatic £100 filing penalty. It doesn’t matter how much tax you had outstanding: if your tax return is filed more than three months late, £10 daily penalties will also start to accumulate up to a maximum of £900.
A penalty of the higher of £300 or 5 per cent of the tax due is then charged if your return is 6 months late and again if it becomes over 12 months late. All of these penalties are calculated separately which potentially could result in late payment penalties of as much as £1,600.
Filing early will give you extra time to plan for any tax you may owe.
By filing your tax return and calculating any tax liability arising, you will give yourself more time to start budgeting and managing your cashflow. The alternative may be interest charges and possible late payment penalties.
You can use your tax code.
If you file your tax return early and submit it by 30th December, 2014 and owe less than £3,000 in tax, you can opt to have your tax liability collected through your tax code. This can be a great option for employees or pensioners, as they can have their tax bill collected from their wages or pension throughout the year easing the pressure on cashflow.
Filing your tax return will give you breathing space if your circumstances have changed.
If your affairs have changed this year, filing early will give you the time and space to consider what tax planning opportunities may be available to you. Filing early will also give you time to collate all the financial documents necessary to file your return, and help to reduce the number of errors you may make.
Any tax due is not payable until the tax deadline anyway.
If you file your return early you won’t immediately be sent a letter demanding payment. On the contrary, if you file your tax return early with HMRC, you are only obliged to pay any tax liability by the normal due dates of 31st January 2015 (balance and the first payment on account, if applicable) and 31st July 2015 (second payment on account, if applicable).
Tax refunds are accelerated.
There’s no point waiting to collect any tax refunds that might be due. HMRC staff are incredibly busy at filing periods and probably won’t prioritise paying out refunds when there are still outstanding taxes to collect. Wouldn’t it be better to have the money sitting in your bank account sooner rather than later.
Collecting the right amount of Tax Credits.
If you are in receipts of tax credit or benefits, your claim needs to be renewed annually by 31st July, and you will need to tell HMRC what your income is. Whilst it is permissible to submit temporary estimates, it is preferable to submit the actual figures as soon as possible to avoid you being overpaid or underpaid until the Tax Credit Office has received your actual figures.
If you’d like any further information on self-assessment, filing your tax return or late payment penalties, then contact Steven Glicher accountants on 0161 405 8007.